FSD Pharma

Overview

FSD Pharma Inc, (CSE:HUGE), wholly owns FV Pharma Inc., a Canadian licensed cannabis producer operating under the Cannabis Act with a vision to develop the largest legal indoor cannabis facility in the world. The company acquired the former Kraft Foods (NASDAQ:KHC) production plant in Cobourg, Ontario and is converting it for cannabis cultivation with its joint venture partner, Auxly Cannabis Group (TSXV:XLY).

As part of the agreement, FSD Pharma retains a 50.1% stream (after all operating expenses are recovered plus a ten percent profit is paid to FSD) of all cannabis and cannabis-derived products produced at the facility, under partnership with Auxly, in perpetuity. Auxly will design and develop all aspects of the facility in staged phases and will receive a 49.9 percent stream of all cannabis produced at the facility. Auxly will also participate in the company’s governance and CEO Chuck Rifici, the co-founder of Canopy Growth (TSX:WEED), has signed on to assist FSD Pharma in their burgeoning operation at the facility. By retrofitting a former food production facility, FSD Pharma is following in the footsteps of two of the world’s largest cannabis companies by market cap, Canopy Growth and Aphria (TSX:APHA), which also began their work with the acquisition of Hershey’s and Heinz facilities, respectively. At over 3.8 million square feet, FSD Pharma’s completed facility aims to be the largest legal indoor cultivation and processing space in the world.

Having been granted its production license in late 2017, the company is currently cultivating cannabis plants and is in the process of obtaining the sales and provisions portion of the license and will soon be applying for a dealer’s license. Following the granting of the licenses, FSD Pharma will be able to engage in research and development related to the extraction of CBD rich cannabis oil for use in the production of concentrated cannabis oil extracts, infused sublingual sprays, vapes, capsules, edibles and the like. FSD Pharma plans on expanding their product line beyond dried cannabis flower to also include pharmaceuticals, vaporizer cartridges, edibles and more.

FSD Pharma announced in October 2018 that it had signed a binding letter of intent to acquire Therapix Biosciences Ltd., a specialty clinical-stage pharmaceutical company. The acquisition will further FSD Pharma’s goal of researching and developing advanced cannabinoid treatments for the medical and recreational cannabis markets around the globe.

FSD Pharma has established many strategic alliances with companies like High Tide Inc., SciCann Therapeutics, Canntab Therapeutics Ltd. (CSE:PILL) and Cannara Biotech. Notably, FSD Pharma’s partnership with SciCann Therapeutics Inc. focuses on the research and development of cannabinoid-based treatments, with one such study aimed at treating sufferers of irritable bowel syndrome (IBS). SciCann’s “steady stomach” cannabidiol (CBD) combination therapy is currently being tested with IBS patients in clinical trials in Pittsburgh.

FSD Pharma is also focused on expanding the company’s business outside of North America. In September 2018, the company announced its intention to launch into the Jamaican market through a joint venture operating as FSD Jamaica. The company plans to open a research facility in Jamaica that will focus on cannabis genetics and the establishment of a cannabis and hemp seed and genetics bank for both the Jamaican and Canadian markets.

Management team with expansive knowledge in cannabis cultivation techniques.

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Business Model

To meet the overwhelming demand for cannabis in Canada FSD Pharma intends to pursue the cannabis market with a disciplined approach, patterning its business model after the pharmaceutical industry. To this aim, the company is in the process of acquiring Therapix Biosciences with the intent of researching and developing advanced cannabinoid-based treatments for the medical and recreational cannabis markets.

As part of the company’s medical cannabis platform, it will be developing proprietary technologies and intellectual property (IP) by conducting clinical trials through Therapix and its partner SciCann. Between Therapix and SciCann, FSD Pharma will be able to develop numerous cannabinoid-based therapies and treatments for a variety of ailments.

Additionally, the company aims to maintain tight cost controls and achieve economies of scale while taking full advantage of its spacious facility. FSD Pharma is supported by a core competency in quality cultivation that will sustain all of the company’s planned business lines under one roof.

The facility will also be the testing ground for technological innovations within the cannabis space, such as new energy-saving lighting and new technologies to manage bacteria and mildew issues. As a former food-grade production facility, FSD Pharma’s production space is already well-equipped to minimize the presence of pests.

The former ‘KRAFT’ Cobourg Facility

FSD Pharma’s cannabis production facility is located in Cobourg, Ontario, only one hour east of Toronto. The company’s joint venture partner, Auxly, is retrofitting the former Kraft Foods facility with the eventual goal of developing approximately 3.9 million-square-feet of cultivation space. Auxly will also be providing operational advisory services, and will play a key role in the management of large-scale development projects at the Cobourg facility. In return, Auxly will receive 49.9 percent of all cannabis products produced at the former Kraft Foods facility once the expansion is complete.

Thanks to its proximity to a metropolitan hub, the facility is easily accessible and is supported by sufficient infrastructure to conduct its operations. In addition to the necessary security, the building has an on-site electrical substation that provides enough power for 9,000 1,000-watt grow bulbs, multiple natural gas lines, 26 loading docks and a 24-inch main sewage pipe. Additionally, the facility’s proximity to Toronto is another cost-saving advantage. By consolidating operations under one roof, FSD Pharma has access to greater economies of scale and the ability to reduce costs as it can host all production and processing activities under one roof.

The former Kraft Facility sits on a 72-acre parcel of land. Currently, 25,000 square feet of the facility is available for cannabis cultivation with four grow rooms coming online in the coming weeks, effectively doubling the company’s production capacity in that space.

The company’s facility expansion is outlined in multiple phases of development. FSD Pharma’s goal is to build out the total capacity of existing land and to own and operate a 3.9 million-square-foot facility within the next 6 years. Auxly is currently building out an additional 220,000 square feet of new cultivation area in the current 620,000 square feet of indoor space available. At the completion of the first round of expansion phases, the property will increase to 820,000 square feet of grow space in anticipation of the final round of development that will create the largest indoor cultivation facility in the world.

In October 2018, FSD Pharma announced the commencement of construction of its heritage museum and flagship dispensary.

Research Opportunities in Israel

In June 2018, FSD Pharma announced that its wholly-owned subsidiary FV Pharma had entered into a strategic alliance with SciCann Therapeutics through the execution of a MOU where the company would invest $3 million in SciCann for a 15 percent equity stake. In return, FSD Pharma received an exclusive license in Canada for the production and distribution of a line of cannabinoid-based, patent-pending and indication-specific products developed by SciCann.

Along with the products, FSD Pharma has been granted access to the cannabinoid scientific research network developed by SciCann, comprised of leading researchers, academic institutions and medical centers. This network allows FSD Pharma to conduct a series of clinical studies for cannabis-based products in a high time and cost-effective environment.

In August 2018, FSD Pharma and SciCann launched a clinical trial research program in Israel with SciCann’s strategic partner Mor Research Applications Ltd. Under the strategic alliance agreement with Mor, SciCann began executing a series of rigorous, randomized, placebo-controlled clinical studies to demonstrate the safety and efficacy of advanced and innovative cannabinoid-based products to be licensed in Canada by FSD Pharma.

Later in the month, the results from the clinical trial were released. The trials centered around SciCann’s patent-pending IBD product, “Steady Stomach.” The Steady Stomach product uses a combination of CBD and other synergistic factors that potentiate and activate the anti-inflammatory properties of CBD, potentially making it an effective treatment for IBD disorders. FSD Pharma then commenced clinical studies to further test the efficacy of Steady Stomach in a pre-clinical study.

The pre-clinical study used a model that tested the products’ efficacy in treating ulcerative colitis in rats. The results demonstrated an improved efficacy for the combination product, when compared to using CBD alone, in reversing the deleterious effects caused by the colitis induction agent. Specifically, CBD alone only saw a 27 percent improvement when compared to the control measure. The Steady Stomach combination treatment, however, achieved a 79 percent improvement and almost completely alleviated the colitis symptoms induced in the model animals.

The following month, FSD Pharma and SciCann announced that they had launched a cardiovascular research program that focuses on developing proprietary cannabinoid-based treatments for the prevention and treatment of atherosclerosis, an underlying factor in strokes and heart disease.

In October, SciCann began studying the “Steady Stomach” combination therapy in clinical trials with IBS patients in Pittsburgh, Pennsylvania.

Therapix Biosciences

In October 2018, FSD Pharma signed a binding LOI to acquire Therapix Biosciences, a specialty clinical-stage pharmaceutical company. As a combined entity, the company intends to focus on the research and development of advanced cannabinoid treatments for a number of ailments. FSD Pharma is currently focused on developing novel cannabinoid-based treatments for several central nervous system disorders, including chronic pain, fibromyalgia, and IBS.

The current FSD Pharma studies complement the R&D clinical programs being conducted by Therapix. Therapix is now undertaking Phase IIA trials with the Yale University Medical Center for its Tourette Syndrome program and is preparing for Phase IIb studies at Hannover and Munich University Medical Schools in Germany for the same program. Therapix has also been working in collaboration with Assuta Medical Centers in Israel to develop therapeutic products for sleeping disorders.

“We are very pleased to announce our intention to acquire Therapix Biosciences. Their concerted efforts to advance the scientific work of Professor Rafael Mechoulam speaks for itself. It is a huge step forward in realizing our vision and mission to become a leading global player in cannabinoid based pharmaceuticals, medicinal marijuana in addition to the recreational use of cannabis” said FSD Pharma Co-Founder and Directors Anthony Durkacz and Zeeshan Saeed.

Jamaica Expansion

In September 2018, FSD Pharma announced that it intends to launch a strategic partnership into the Jamaican cannabis market as part of the company’s plans to expand internationally. Pursuant to the company’s intentions, FSD Pharma has signed a LOI with JJAMACANN Inc. to form a joint venture that will operate under the name FSD Jamaica. The Jamaican joint venture is expecting to partner with Nature’s Purest Ltd., a Jamaican corporation with a cultivation license and existing operations in Jamaica.

As part of the LOI, FSD Jamaica will be tasked with developing an experimental center that will focus on developing cannabis and CBD genetics. The company also intends to develop a genetics and seed bank for cannabis and hemp products for the Jamaican market and the Canadian market where permitted.

“We are excited to be working with a world-class and knowledgeable team of local experts and entrepreneurs with extensive cannabis cultivation experience,” said Durkacz. “Jamaica has historically produced some of the best cannabis over the past 50 years. FSD Jamaica intends to take advantage of the ideal climate and soil conditions on the NPL property and surrounding area to produce the highest quality cannabis, hemp and cannabinoid products possible. FSD Jamaica is well-positioned to bring Jamaican branded, world class medical and recreational products to market by 2019.”

Strategic Alliances

Cannara Biotech

In June 2018, FSD Pharma signed a partnership agreement with Cannara Biotech, which allows FSD Pharma to become one of the largest indoor medical cannabis growers in North America. With the signing of the agreement, FSD Pharma and Cannara have a combined floor space of approximately 1.2 million square feet of indoor growing space.

Under the partnership agreement, FSD Pharma will occupy approximately 105,000 square feet of Cannara’s 625,000-square-foot facility located 45 minutes outside of downtown Montreal. The new space will be used as a cultivation space and or for the sale of products, such as dried and fresh cannabis, cannabis oil and other derived cannabis products for medical and recreational purposes.

Quebec is the second largest province by population in Canada and offers a sizeable market opportunity for cannabis and cannabis-derived products. As an added benefit, Quebec offers the lowest rates for electricity in North America, a boon for energy-intensive operations like cannabis cultivation.

High Tide Inc.

FSD Pharma has partnered with High Tide Ventures, a fully integrated retail distribution company in Canada. High Tide has 22 development permits for retail cannabis stores in Alberta and expects to open the maximum permitted number of 37 stores in the province. The company is awaiting its wholesale cannabis permit in Saskatchewan, expects to establish the maximum allowed number of 8 retail cannabis stores in British Columbia and intends to obtain a large number of retail licenses in Ontario. The company owns four of Canada’s most prominent retail brands that are poised to take advantage of the legal recreational market in Canada. To further their partnership, FSD Pharma entered into a non-binding MOU with High Tide to supply the Saskatchewan market with up to 5,000 kilograms of cannabis products over the next year.

“This non-binding MOU is the result of FSD Pharma’s focus on growing high quality indoor hydroponic cannabis, which I expect will yield more opportunities to build on our relationship in the near future,” said Thomas Fairfull, CEO of FV Pharma.

Canntab

In September 2018, FSD Pharma signed a definitive collaboration and profit sharing agreement with Canntab, a leader in the rapidly growing cannabis pill market, to process and sell cannabis products and to provide Canntab with 10,000 square feet of space at the company’s Cobourg facility.

Canntab will build its own manufacturing facility within the Cobourg facility in order to produce a suite of cannabis oral dose delivery platforms and other cannabis-based products, including sleep aids and pain relievers. Under the agreement, Canntab will share 50 percent of their profits from the sales of their products with FSD Pharma.

“The company is pleased to welcome Canntab to our premises and to begin the process of offering through our agreement with Canntab a cannabis delivery platform consisting of pills and tablets that is the accepted norm among patients and doctors,” said Thomas Fairfull, CEO of FV Pharma. “We have complete faith in Jeff and his experienced team to deliver the best that the medicinal market demands. I look forward to an ongoing partnership with everyone involved as we continue to expand our offerings at our Cobourg facility”.

Later that month, Canntab delivered the first of its equipment to FSD Pharma’s Cobourg facility. The equipment consisted of a GMP certified high output tablet press, which is capable of pressing more than 1.5 million tablets per day, a blending machinery, large scale processing and drying equipment and packing equipment.

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Management

Rupert Haynes—CEO

Rupert Haynes is a healthcare executive with nearly three decades of experience in the pharmaceutical sector. Mr. Haynes’ most notable accomplishment as head of Global Marketing at GW Pharmaceuticals was leading the strategic development of the firm’s cannabinoid portfolio including the development of Epidiolex®, an FDA-approved cannabidiol for the treatment of seizures associated with Lennox-Gastaut syndrome or Dravet syndrome. Mr. Hayne’s led GW Pharmaceutical to be the first and only company in the world to develop an FDA approved cannabis-based drug. Before GW, Mr. Haynes held numerous commercial roles, including senior leadership positions, at both large pharma and bespoke biotech firms which include Sobi, UCB Pharma, Bristol-Myers Squibb Ltd, UK, and Pharmacia & Upjohn Ltd, UK. His field of expertise includes cannabinoid treatments for neurological, neurodegenerative and neuropsychological conditions.

Dr. Raza Bokhari – Co-Chairman of the Board

Recipient of Philadelphia Business Journal’s “40 under 40” award, physician turned entrepreneur, Dr. Raza Bokhari has over the past several years developed outstanding expertise in aggregating and accelerating life sciences and healthcare services companies. An effective “change agent”, with several years of experience and expertise in start-up and turn-around businesses, he has a special knack of adeptly turning around financially struggling companies. Over the years, he has come to realize the special role of private equity funds, venture capital money and leveraged debt partners in executing accelerated growth trends in healthcare services and cancer diagnostics and therapeutics.

Dr. Bokhari has also spoken before professional organizations and academic institutions, including the US Congressional Caucus. He has a Doctor of Medicine degree from the University of Punjab, Rawalpindi Medical College and an Executive MBA from Temple University, Fox School of Business & Management. He currently serves as the Chairman & CEO of PCL, a global diagnostic provider of addiction screening and opioid prescription medication monitoring, is the managing partner of RBx Capital, LP and is a board member for Akers Biosciences.

Anthony Durkacz – Co-Chairman of the Board and Founder

Anthony Durkacz is currently a Director and Executive Vice President at First Republic Capital Corp. since January 2014. First Republic Capital Corp. has acted as the exclusive agent of the company and has raised approximately $53 million in equity capital to date. Previously, he was President of Capital Ideas Investor Relations from January to December 2013. Before that he was a Director and CFO of Snipp Interactive Inc. (TSXV: SPN) from January 2011 to January 2013. He was instrumental in the financing and public listing of the mobile marketing company with operations in Canada, the USA, Mexico and India.

Durkacz is also the owner and President of Fortius Research & Trading Corp., which provides financial and investor relations consulting services to micro and small cap companies in various sectors, and develops investment strategies for high net worth individuals. From 2006 to 2009, he served as COO and CFO of MKU Canada Inc. engaging in mergers and acquisitions globally, and from 2002 to 2006 he served as the CFO of Astris Energi Inc., a dually listed public company in the USA and Canada which was acquired by an international conglomerate. He began his career at TD Securities on the capital markets trading floor. Durkacz holds an Honors Bachelor of Business Administration from Brock University with a major in both Accounting and Finance.

Zeeshan Saeed – President, Founder and Director

Zeeshan Saeed is an entrepreneur and is one of the founding members of FV Pharma inc which is now wholly owned by FSD Pharma Inc. He has been involved with the company from the beginning since July of 2013. Saeed has provided consulting advice to FV Pharma and was instrumental for raising the initial seed capital. He played a key role in bringing together a team of professionals in the development of the corporation’s business plan as well as bringing key relationships to the company. He has experience in international capital markets and has helped various startups with the process of raising initial funding and getting listed on various stock exchanges.

Saeed is an engineer by qualification and is currently the Executive Vice President and Director of FSD Pharma Inc. Before entering the capital markets, Saeed was the founder and CEO of Platinum Telecommunications Inc., which was eventually taken over by a public company.

David Urban, Director

Driven leader and board member with comprehensive accomplishments leading corporate development, government affairs, coalitions, legislative influence, political campaigns and cross-functional teams to achieve goals. Known as an innovative thinker with strong telecommunications, finance, health care, technology, defense, legal, trade and energy acumen. Demonstrated success advising leaders at the highest level of business and government in complex, regulated organizations. Recognized influencer and thought leader that is regularly cited by CNN, New York Times, Washington Post and other leading media outlets. Enables businesses to maximize performance by implementing appropriate strategies through analysis of details to gain understanding of the competitive position, emerging issues, trends and relationships. Continued progression of leadership advising Fortune 100 C-level executives, the president of the United States, members of congress and leading a top government relations firm. Awarded the Bronze Star for action as an Army officer in Iraq.

Donal Carroll, CPA – CFO

Donal Carroll has been Chief Financial Officer of Newgioco Group, Inc. since June 6, 2017. Carroll is a Business Executive who is currently Chief Financial Officer of World Class Extractions Inc. He has 20 years of corporate finance leadership and public company experience, as well as deep expertise in syndicate investing both in equity and debt securities. With a balance of prudent financing practices and unique insights, Carroll has successfully guided companies for expansion and growth.

Throughout his tenure with Danaher, Alberto Culver and Cardinal Meats, he was instrumental in major restructuring activities, mergers and acquisitions and the implementations of new internal controls and ERP systems resulting in significant efficiencies through periods of substantial change and strong company growth. Carroll has been Independent Director of Bird River Resources Inc., since September 15, 2017. He serves as Member of the Board of Directors at FSD Pharma Inc. He holds a CPA-CMA designation as well as a Bachelor of Commerce degree from University College Dublin (UCD).

Gerald Goldberg, CPA, CA – Director

Gerald Goldberg has over 30 years of experience in the service, distribution, retail, mining, natural resources, oil and gas, real estate, not-for-profit entities and manufacturing industries, with a strong emphasis in taxation and business advisory services. He served as a Partner in the predecessor firm of Grant Thornton for over 15 years before he headed the U.S. Public Company audit division of Academy Capital Corp. Goldberg has served in various roles at the following companies: Gravitas Financial Inc., Gilla Inc., Capricorn Business Acquisitions Inc., Baymount Inc., Blue Nordic Partners Inc., Leo Acquisitions Corp., InterAmerican Gaming Inc., Grasslands Entertainment Inc., Pinetree Capital Ltd., Prime City One Capital Corp., Emerge Resources Corp., Victory Capital Corp., Lakeside Minerals Inc. and Keyuan Petrochemicals Inc.

Vladimir Klacar – Director

Vladimir Klacar is Associate General Counsel & Head of Regulatory Affairs at Auxly Cannabis Group Inc. Vladimir is widely regarded as one of Canada’s leading advisors in the Canadian cannabis industry. Prior to joining Auxly, he was an associate in the Cannabis Group at Bennett Jones LLP. In this role, he had a broad corporate commercial practice where he advised local and international clients on regulatory matters such as licensing and compliance pursuant to the ACMPR and the Narcotic Control Regulations. Klacar has represented a variety of cannabis industry participants on complex regulatory matters including licensed producers, licensed producer applicants, licensed dealers, e-commerce platforms, seed-to-sale software developers, design and build firms, patient aggregators, equipment manufacturers and distributors, and cannabis branding companies. Klacar earned dual law degrees from the University of Windsor and University of Detroit Mercy.

Dr. Zohar Koren – Head of Scientific Advisory Board

Dr. Koren is co-founder and CEO of SciCann Therapeutics Inc., a Canadian-Israeli specialty pharmaceutical firm dedicated to the development of cutting edge technologies in the pharmaceutical cannabinoid space. Prior to that, Dr. Koren served as VP BD of Mor Research Applications, the technology transfer office of Clalit Healthcare Services, Israel’s largest medical insurer and healthcare provider. He also served as VP BD of Talent Biotechs, a pharmaceutical company which developed CBD based therapies for GVHD (Graft Vs Host Disease), until its acquisition by Kalytera Inc. in 2017.

Previously, Dr. Koren served as Co-founder, CEO and CFO of Cannabics Pharmaceuticals Inc., a developer of cannabis based therapies for oncology patients, and prior to that as Director of Business Development at Aposense Ltd., a developer of novel pharmaceutical products in the oncology, CNS and metabolic disease fields.

Michael Ash – Chief Commercial Officer

Michael Ash is currently Chief Commercial Officer of FV Pharma Inc. He brings a wealth of pharmaceutical industry expertise to FV Pharma in the areas of domestic and international sales and distribution, and product and brand development. Ash has an extensive network of retail relationships that he will leverage to develop and grow FV Pharma’s distribution network across Canada, thereby enabling the sale and supply of medical pharmaceutical-grade cannabis on a national basis. He has held various high-profile positions in the pharmaceutical industry. From 2015 to 2018, Michael was President of Pharmetics Inc. and was identified by the private equity firm that owned the company as the ideal industry expert capable of rebuilding the business, increasing sales and selling the company in 2018.

From 2013 to 2015, Ash was the President of NutraLab Canada Ltd. where he developed and launched private label brands of vitamins, minerals and supplements for large retailers across the country. From 1997 to 2013, he held the role of Senior Vice-President of Sales and Marketing at Pharmetics Inc. where he successfully grew sales of vitamins and over the counter (OTC) products from 15 million to close to 100 million dollars. He was able to accomplish substantial sales growth due to his strong retail relationships allowing the business to become the number one supplier of private label OTC products in Canada.

From 1984 to 1995, Ash held progressive sales roles at Apotex Inc., including the role of Managing Director International where he was accountable for developing international distribution networks for the company’s generic drug brands. In his role, he travelled extensively around the world to establish joint ventures and distribution channels on behalf of the company. During his tenure, international sales grew to over 50 million dollars. he holds a BA in Political Science from McGill University.

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